Tuesday, February 19, 2019

Cleveland Blockchain Company Votem Abruptly 'Restructures' with Major Layoffs

Update: This article's previous headline stated that Votem had closed and that all employees had been fired. CEO Pete Martin told Scene in an email that while the company had "kicked off a restructuring and recapitalization" plan on Friday that included "major layoffs," Votem is still in operation and actively supporting current customers. Scene can not verify that and sources say that is not the case.

Original story: One of Cleveland's largest blockchain start-ups abruptly closed last week due to a lack of funding. Employees at Votem, a company making innovations in online voting platforms, did not receive their most recent paychecks and were told on Friday that everyone was fired, effective immediately.

CEO Pete Martin told employees in an internal email that their jobs might not be permanently gone — he's attempting to raise additional money — but word from (former) employees is that there's not much confidence he will.

In late 2018, Votem acquired the California-based online voting company Everyone Counts. The roughly fifty employees based in California and around the world lost their jobs Friday as well. Cleveland's ~20 employees are based in Tower City's Start Mart, home of Flash Starts LLC, the early-stage start-up accelerator.

Votem had looked to be picking up momentum in the blockchain-voting space. Martin boasted of the company's "blue-chip" public and private sector clients, including the United Nations and the Rock & Roll Hall of Fame. And in 2017, Votem processed nearly 1.9 million votes as part of the Rock Hall's fan voting for that year's inductions. At the time, it was considered the largest successful application of a blockchain voting platform.

"Votem authenticated each voter’s identity, provided a chain of custody, and proved itself fast, secure, auditable, and convenient," wrote Alex Tapscott, who studied the Rock Hall voting process for the Blockchain Research Institute.

The company was also the first in Ohio to attempt an initial coin offering (ICO), the crypto version of an initial public offering. Pete Martin told Crain's that despite the unregulated and opportunistic nature of ICOs, he was "as compliant as anyone could possibly be." He said that by 2025, Votem's goal was to have logged 1 billion votes in elections internationally.

Bernie Moreno, the local auto dealer and Blockland creator, is a small investor in the company. He said he owns less than a five-percent stake, and that Votem "hit a cash crunch that they were unable to get out of." He characterized crunches of this sort as being typical for start-up companies.

"It’s very unfortunate," Moreno told Scene. "They have a great business model that I believe can help restore confidence in voting ... and save governments much-needed money."

One local entrepreneur who preferred to remain anonymous because of their connections with Votem told Scene that the company's fate was "exactly what [they] expected," and that it was a bad look for both Cleveland and the Blockland initiative.

They admitted that while local entrepreneurs sympathize with the employees losing their jobs, many of them are probably greeting the Votem news with pleasure — "What's the German word? Schadenfreude?" — because it validates many of their doubts and warnings about the hype over Blockland and blockchain start-ups generally.